Nidhi Company

February 28, 2025 by Team Instabizfilings

A Nidhi Company is a type of non-banking financial company (NBFC) that is recognized under the Indian Companies Act, 2013. The primary purpose of a Nidhi Company is to cultivate a habit of saving among its members and to provide loans to them at reasonable interest rates. Nidhi companies are essentially mutual benefit societies, which can engage in activities like accepting deposits and providing loans to their members. Here's a detailed guide to understanding the registration process, compliance requirements, and regulations related to Nidhi Companies in India.

What is a Nidhi Company?

A Nidhi Company is a type of financial institution that is formed to encourage its members to save money and lend it to one another. The primary objective of Nidhi companies is to promote the habit of thrift and savings among their members. It can only deal with its members and has a limited scope for business operations.

Nidhi Companies are governed by the Nidhi Rules, 2014 and the Companies Act, 2013.
They are also known as Mutual Benefit Societies.
These companies cannot engage in activities like trading, investment, or real estate business.
They are primarily engaged in accepting deposits and granting loans to their members.

Nidhi Company Registration Process

Step 1: Choose the Company Type To register a Nidhi Company, it must be formed as a Public Company under the provisions of the Companies Act, 2013. The company needs to indicate its status as "Nidhi Limited" through its name.The company must also have at least 7 members to begin with.
Step 2: Apply for Director Identification Number (DIN) and Digital Signature Certificate (DSC)

All directors must apply for a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA).
A Digital Signature Certificate is necessary for conducting online document submissions.

Step 3: Name Approval

The first step in the incorporation of a Nidhi company is obtaining approval for the name of the company. The name should include the word "Nidhi Limited".
You must apply for the name through the MCA portal using Form RUN (Reserve Unique Name).

Step 4: The fourth step entails drafting the Memorandum of Association (MOA) and Articles of Association (AOA) because they act as essential incorporation documents. The company documents specify objectives together with rules and organizational structure.

The Nidhi company scope and objectives get defined through MOA.
AOA establishes the set of internal guidelines through which the Nidhi company manages its governance activities.

Step 5: Filing for Incorporation Once the name is approved and MOA/AOA are ready, you must file the incorporation documents using Form SPICe (INC-32) with the MCA. Along with the form, the following documents should be submitted:

PAN card of the company.
Proof of registered office address.
Identity and address proof of the directors.

Step 6: Obtaining Certificate of Incorporation After the verification of the documents by the Registrar of Companies (ROC), a Certificate of Incorporation will be issued, and the company will be officially registered.
Step 7: Apply for Permanent Account Number (PAN) and Tax Registration Once the company is incorporated, you will need to apply for a PAN and Tax Registration (GST, if applicable).

Nidhi Company Requirements

Before registering a Nidhi Company, there are certain basic requirements to be met:

Minimum Members:

The company should have at least 7 members to start.
At least 3 directors are required.

Paid-up Share Capital:

The Nidhi Company should have a minimum paid-up capital of ₹5,00,000.

Registered Office:

The business of the novel company requires a physical presence that must be located in Indian territory.

Business Activity:

Nidhi companies must only engage in the business of borrowing and lending money to their members.
It should not engage in activities like investment, real estate, or trading.

Director Requirements:

Directors must be natural persons (not companies).
The company must have at least 3 directors.

Loan and Deposit Limits:

The maximum loan amount to a member is limited to ₹2,00,000.
The company can accept only deposits from its members and must not offer fixed deposits, recurring deposits, etc.

Nidhi Company Compliance and Regulations

After registration, Nidhi Companies are required to comply with various regulations set under the Nidhi Rules, 2014 and the Companies Act, 2013. Below are some of the major compliance requirements:

Maintain a Minimum Net Owned Funds (NOF): Nidhi companies must maintain a Net Owned Funds (NOF) of at least ₹10,00,000. Net Owned Funds are calculated by deducting liabilities from the assets, and the ratio should be at least 1:20.
File Annual Returns: Nidhi companies are required to file annual returns with the Ministry of Corporate Affairs (MCA) and comply with the annual compliance requirements as per the Companies Act, 2013.

Form AOC-4: To file financial statements.
Form MGT-7: To file annual return.

Regular Audits: Nidhi companies must undergo statutory audits every year, and the audit report must be submitted to the ROC.
Regular Shareholder Meetings: Annual general meetings (AGMs) should be conducted every year. Minutes of the meeting must be maintained.
Maintenance of Registers: A Nidhi company is required to maintain a register of members, register of shares, and other statutory registers. These registers must be made available for inspection by members at the company's registered office.
Restrictions on Deposits and Loans: Members of Nidhi companies may accept money deposits and deliver financial loans to fellow members. They cannot accept deposits from the public or non-members. The company is also restricted to lending only to members and must not exceed a loan of ₹2,00,000 to a member.

Nidhi Rules, 2014

The Nidhi Rules, 2014 govern the operations of Nidhi Companies in India. These rules provide guidelines regarding the incorporation, management, and activities of Nidhi companies.

Regulation of Membership: Nidhi companies must have at least 200 members within a year of their incorporation.
Deposits and Loans: Nidhi companies can accept only secured deposits and must lend money only to their members at reasonable interest rates.
No Other Business: A Nidhi company must not engage in any other business, except for receiving deposits and lending to its members.
Capitalization: Nidhi companies must maintain a minimum capitalization of ₹10,00,000, and their capital must be exclusively from the members.

Benefits of Registering a Nidhi Company

Limited Liability: As it is a public limited company, members have limited liability.
Promote Savings: Nidhi companies encourage the habit of saving among members and allow them to borrow money at affordable rates.
Lower Cost of Borrowing: Nidhi companies often provide lower interest rates on loans compared to traditional financial institutions.
Mutual Benefit: Nidhi companies provide financial benefits to their members without involving external investors or shareholders.

Conclusion

Setting up a Nidhi Company delivers an excellent opportunity to grow savings along with financial inclusion throughout the community. These companies create an enduring foundation regarding business and compliance procedures by complying with the Companies Act, 2013 and Nidhi Rules, 2014.

Proper registration of a Nidhi Company requires legal and financial expertise to maintain accurate procedure compliance with current regulatory rules.

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